All you need in this life is ignorance and confidence; then success is sure.
Though the confidence is not yet set in but given the current positive momentum, the bulls are hoping that May does not add to the list of big crashes of this year. What's more, the global cues have been encouraging and remain so. In case you missed what happened in the US over the past couple of days, the Fed on Wednesday cut its key interest rate by a quarter of a percentage point to 2%. It is the seventh reduction in the federal funds rate since the central bank began fighting a credit squeeze in the second half of last year and the growing possibility of a recession.
The FOMC hinted that since the economic outlook has not worsened, it will probably not need to cut rates any more. Wall Street's initial reaction on Wednesday was mixed. Dow Jones Industrial Average, which was up by triple digits and topped 13,000, erased most of the gains. US stocks closed lower on Wednesday. However, after a slow start on Thursday, US stocks finished sharply higher as investors reckon that the Fed is essentially sending the message that the worst of the credit crisis is over, and not much downside is on the horizon.
Earlier on Wednesday, the US government reported that the world's biggest economy almost stalled in the first quarter of this year (growing 0.6%), but for an increase in business inventories and strong exports. The labour market weakened, the real estate market slumped and consumers too cut back on spending. Friday's focus will be on the April jobs report due out before the start of trade. US companies are expected to have cut 75,000 jobs from their payrolls after cutting 80,000 last month. The unemployment rate is expected to have risen to 5.2% from 5.1% the previous month.
Back home, the result season is almost done, though quite a few companies are still to announce their annual figures. There have been quite a few negative surprises as India Inc. is still facing a number of headwinds. This year will continue to be a challenging one for the Indian industry. Having said that, one can look forward to brighter days in the second half of the current fiscal and the next one, especially if the monsoon turns out to be good. Inflation is also likely to cool off over the next few months if oil and other commodity prices soften. Interest rates seem to have peaked out, and may remain stable (or perhaps even fall in some cases).
In short, the storm may have passed, and one may start harbouring hopes for better days ahead. Technically too, the charts are showing positive signs as the Nifty has surpassed the 200 DMA and remains above that. A major downside from this level may not happen, at least in the immediate future, unless there is some fresh bad news. Some market analysts see the Nifty gaining another 200 points, before the bulls face fresh resistance. Signs from the F&O segment are also not bad. Today, we expect a strong opening due to firm global markets. And, though inflation could rise further, the market may ignore the same.
FIIs were net sellers of Rs1.52bn (provisional) in the cash segment on Wednesday while the local institutions offloaded shares worth Rs385.8mn. In the F&O segment, foreign funds were net buyers of Rs5.59bn. On Tuesday, FIIs were net buyers of Rs3.45bn in the cash segment while Mutual Funds pumped in Rs3.82bn on the same day.
GE Shipping, Jyoti Structures, Pratibha Industries, United Phosphorus, NOCIL, Surana Industries and SBI will declare their results today. Tricom India will consider a stock split today.
Asian stocks are trading mostly higher this morning, sending the region's benchmark index to its steepest gain in almost two weeks, on speculation that turmoil in global credit markets will ease and as sales of cars and chips increased.
Mizuho Financial Group jumped after US Treasury Secretary Henry Paulson said the credit crisis is probably more than half over. Toyota Motor climbed after reporting US car sales increased for the first time in five months. Samsung Electronics led an advance by chipmakers after an industry group said semiconductor sales rose in the first quarter.
The MSCI Asia Pacific Index added 1.4% to 151.51 as of 12:03 p.m. in Tokyo, the biggest gain since April 21. About four stocks climbed for each that retreated, with a measure of finance stocks advancing the most among the index's 10 industry groups. The index is up 1.5% the past five days, set for its fifth winning week in six. Japan's Nikkei added 1.8% to 14,014.40. Benchmark indexes elsewhere advanced, except in the Philippines and Malaysia. China is closed for a holiday.
US stocks rose on Thursday to the highest level since January, buoyed by a rally in the dollar and better-than-estimated readings on manufacturing and consumer spending. A few strong technology earnings too prompted investors to dump commodities and buy shares of banks, retailers and computer companies.
Bank of America, JPMorgan Chase and Citigroup led financial stocks to a two-month high as the dollar rose 1.1% against the euro on speculation that the Fed is done cutting interest rates. Symantec surged the most in six years after the world's biggest maker of security software said fourth-quarter profit tripled, while Comcast posted its steepest rise since 2002 on new Internet-access subscribers.
The S &P 500 Index jumped 23.75 points, or 1.7%, to 1,409.34, its first close above 1,400 since January 14. The Dow advanced 189.87 points, or 1.5%, to 13,010, the first close above 13,000 since January 3. The Nasdaq Composite rose 67.91 points, or 2.8%, to 2,480.71.
Market breadth was positive on Wall Street. Three stocks rose for each that fell on the New York Stock Exchange.
US light crude oil for June delivery fell 94 cents to settle at $112.52 a barrel on the New York Mercantile Exchange. Meanwhile, the national average price for a gallon of regular unleaded gas hit an all-time record of $3.623, AAA reported.
COMEX gold for June delivery fell $14.20 to settle at $865.10 an ounce. Treasury prices slumped as investors pulled money out of the safe-haven buy, raising the yield on the benchmark 10-year note to 3.76% from 3.72% late on Thursday.
The dollar rose to the highest level in five weeks against the euro today. The dollar rose to $1.5466 against the euro at 4:14 p.m. in New York, from $1.5622 yesterday. It touched $1.5430, the strongest level since March 25. The dollar increased 0.5% to 104.38 yen, from 103.91.
The UK's FTSE 100 Index ended the slowest trading day of the year unchanged. The FTSE 100 Index ended unchanged at 6,087.3 as five stocks dropped for every four that rose. Some 580mn shares changed hands, half of yesterday's total and the fewest since Dec. 31.
Germany's DAX gained nearly 1% yesterday to 6,948.82 while the CAC in France was up 19 points at 4996.50.
In the emerging markets, the Bovespa in Brazil rallied 6.3% to 67,868 while the IPC index in Mexico ended almost flat at 30,281. The RTS index in Russia was down 0.2% at 2122 while the ISE National 30 index in Turkey slumped 2.3% to 53,107.
Fed, global trend to drive sentiment
After a positive start, which was in reaction to yesterday’s announcements by the RBI and the Finance Minister, markets turned range bound in the early afternoon trades. From thereon, the bulls could not maintain the buying tempo and chose to remain in the sidelines ahead of today’s Fed announcement.
FMCG stocks were seen leading in the late afternoon trades with upward movement seen in Nestle which gained by over 9% and Tata Tea and ITC which rose in the range of 3-4%.
Auto stocks also showed momentum with TVS Motor leading the sectoral rise by 11%, followed by M&M and Tata Motors.
However, the realty sector was seen lagging behind with a drop of 1.7%. Unitech, DLF and Peninsula Land were among the major laggards down in the range of 2-3%.
Finally, the BSE 30-share Sensex was down 119 points at 17,259 and NSE Nifty was down 30 points at 5,166.
M&M rose by over 4% to Rs670 after reports said that the company has planned an ultra low-cost rural tractor at a cost of around Rs0.2mn. The scrip touched an intra-day high of Rs678 and a low of Rs644 and recorded volumes of over 1, 00, 000 shares on BSE.
Satyam gained by over 0.5% to Rs482 after reports said that the company has entered into an agreement with Arcelor-Mittal for providing sub-contractor activities and help in overall business transformation. The scrip touched an intra-day high of Rs499 and a low of Rs470 and recorded volumes of over 21, 50, 000 shares on BSE.
Nalco fell by over 2% to Rs449. Reports said that Nalco and Tata are in talks to build a $3bn smelter in Africa. The scrip touched an intra-day high of Rs456 and a low of Rs430 and recorded volumes of over 90, 000 shares on BSE.
Cairn India dropped by over 4.5% to Rs248 following reports stating that the company which will start Bhagyam output in 2010, received approval to develop field with peak output of 40,000 barrels per day. The scrip touched an intra-day high of Rs263 and a low of Rs246 and recorded volumes of over 17, 00, 000 shares on BSE.
Reliance Industries reduced by over 1% to Rs2,614. According to reports, the company’s controlled gas field in KG basin will go on-stream by August 2008. The scrip touched an intra-day high of Rs2,674 and a low of Rs2,605 and recorded volumes of over 4, 50, 000 shares on BSE.
On account of the holiday on May 1, the Indian markets will not be able to react to the outcome of the Fed meet. While results will continue to pour in, the movement to a large extent will depend on how the global indices behave.
Corporate News
IOC sells oil bonds worth Rs22.8bn for meeting its resource requirements. (BL)
Small telecom companies cry foul over Bharti’s rate cut on roaming and STD calls. (ET)
Tata Teleservices crossed 3mn subscriber base in Delhi and NCR. (FE)
Reliance Petro is expected to recover its cost in the first 2.5 years of its operations. (FE)
Supreme Court asks Tata Tele and RCom to pay Rs7bn to BSNL. (BL)
BHEL and NTPC announced a JV to undertake equipment manufacturing and engineering procurement and construction (EPC) work for power projects. (BL)
Reliance Communications to broaden its business canvas by foraying into the IT sector. (BL)
Essar Group buys US steel maker and distributor Esmark a US based company for US$1.1mn. (ET)
ONGC strikes oil in Deccan traps. (ET)
ONGC plans to drill 162 wells in 2008-09. (FE)
IOC to buy naptha worth Rs14.9bn, the company has placed order for same. (FE)
Tata Power refinances bridge loan for acquisition of 30% in coal companies. (FE)
Dr Reddy's Laboratories has signed an agreement to acquire BASF's pharmaceutical contract manufacturing business. (BS)
L&T to hold 74% stake in JV with NHPC. (ET)
NTPC seeks ministries help to resolve supply issue with Bhel. (FE)
Cairn India has got the final approval from the petroleum ministry for laying a special pipeline to transport the crude oil from the field in Rajasthan to the Gujarat coast. (BS)
Zee eyeing German media companies entertainment business. (ET)
Tech Mahindra wins Billing and OSS World excellence award in the best billing solution category. (FE)
ONGC to pay US$1bn cess for Cairn’s crude oil. (ET)
SBI may partner Australian company IAG for non-life insurance. (ET)
Wipro’s Mr. P R Chandrasekar to join Hexaware as a CEO. (ET)
Mindtree set to buy Aztecsoft for Rs4bn. (BS)
Essar Oil plans a petrochem facility at its Vadinar refinery. (BL)
Mr R S Sharma takes over as a new Chairman and MD of NTPC. (BL)
DLF jointly with a Spanish builder has bid for US$4.7bn rail road contract in India. (DNA)
Ashok Leyland to invest Rs30bn on its new plant, coming up in Uttarakhand and on capacity expansion of its existing unit at Ennore. (BS)
Tata Tele to invest Rs1bn for expansion in Rajasthan. (ET)
M&M to foray into film production. (ET)
BHEL to increase its R&D spend to about Rs9bn over the next three years from Rs4.6bn during 2007-08. (BS)
HCC may set up subsidiaries for real estate and infra business. (ET)
RNRL expects gas from KG basin to start flowing from 2009. (ET)
Idea to invest Rs16bn for operations in new circles. (BS)
Trent buys 100% stake in the retail chain Landmark. (BS)
Reliance Power to buy more coal mines in Indonesia. (BS)
Reliance Communications targets US$20bn global retail ILD market by adding features on its direct calling cards. (DNA)
BEML sets up a sourcing office in Shanghai and expects a business volume of Rs3bn in next 2-3 years. (ET)
PGCIL gets navratna status. (ET)
Videocon Group to establish US$1.5bn chip unit in Italy. (ET)
L&T Concrete sale near completion. (ET)
Apollo Hospital to invest Rs10bn for setting up 15 hospitals in India. (ET)
Jet Airways and SpiceJet have hiked fares as fuel charges zoom. (BS)
Parsvnath Developers acquires 1.18 acre plot in central Delhi for Rs2bn. (BS)
Glenmark to launch 5 drugs a quarter in the US. (DNA)
Strides Arcolab inks deal with Genepharm Australasia to sell its Australian and Asian business. (ET)
Spice Mobile set to launch a GSM phone for Rs800 this month. (BS)
Nucleus Software to spend Rs300mn for setting-up a software development centre in Jaipur. (DNA)
Webel Solar to invest Rs3bn for capacity expansion. (DNA)
Economic News
India’s trade deficit increases to Rs80.4bn in 2007-08 due to higher oil bill. (ET)
Cars and two-wheelers sales reverse slowdown in April 2008. Sales of Maruti and Hyundai grow by 22.4% and 36.7% respectively and Bajaj and Hero Honda register 23% and 9% growth respectively. (BS)
FM has asked public sector banks to disclose their exposure to forex derivatives and structured products. (BS)
Rates for home loan between Rs20-30lakhs are likely to soften. (ET)
CRR hike may be recouped from deposits. (ET)
The Drugs Controller General of India to reject applications seeking marketing approvals for copycat versions of medicines that have product patents in the country. (BS)
FM said that the banking transaction tax will be withdrawn by the end of this year. (BS)
Railways to rollback iron ore freight rate hike. (FE)
Government to make weekly price index into monthly by year-end. (BS)
Telcos ask Trai to fix channel price for IPTV. (ET)
Government to take action against airlines imposing a congestion fee. (ET)
Government wheat purchases hit 4-year high. (BS)
Capacity additions likely to soften cement prices. (ET)
Exports in March touch US$16.3bn. (BL)